Advanced Pathology Solutions agrees $30 million False Claims Act settlement in Arkansas healthcare fraud case

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Advanced Pathology $30M settlement

Highlights

Advanced Pathology Solutions agreed to a $30 million False Claims Act settlement with the DOJ over allegations of kickbacks and unnecessary pathology testing from 2015 to July 2022.
The United States alleged APS provided unlawful kickbacks to gastroenterology practices and managed 'lean labs,' facilitating false claims to federal healthcare programs.
The DOJ emphasized ongoing enforcement against healthcare fraud, highlighting scrutiny of laboratory billing and warning of consequences for improper referral and reimbursement practices.

Settlement covers kickback and testing allegations

As announced by the U.S. Department of Justice, the settlement resolves allegations in a complaint the United States filed on April 8 in the U.S. District Court for the Eastern District of Arkansas. The government alleges that Advanced Pathology Solutions PLLC, formerly known as Advanced Pathology Solutions LLC, and APS MSO LLC, together with current and former owners Kevin Hannah, Donell Burkett and Daniel Hunter Pledger, furnished unlawful kickbacks and ordered medically unnecessary pathology testing services.

The United States alleges that from 2015 through July 2022, APS and its owners violated the False Claims Act by providing kickbacks to gastroenterology practices to induce referrals of pathology testing, leading to false claims submitted to federal healthcare programs. The complaint also alleges APS set up and managed limited-purpose laboratories, described as lean labs, in gastroenterology practices nationwide, allowing those practices to bill for preparing and staining biopsy specimen slides.

In addition, the settlement resolves allegations that from Nov. 1, 2018, to Nov. 30, 2020, APS and chief executive Kevin Hannah knowingly and willfully provided unlawful kickbacks to Richard Sorgnard through volume-based commission payments to induce patient referrals for epidermal nerve fiber density, or ENFD, testing.

Enforcement signals continued scrutiny of lab billing

Assistant Attorney General Brett A. Shumate of the Justice Department's Civil Division says healthcare referrals must be based on patient interests rather than kickbacks, and says the settlement shows the department's effort to hold companies and individuals accountable for improper arrangements that burden federal healthcare programs with unnecessary claims.

The matter is being handled by the Justice Department's Civil Division, Commercial Litigation Branch, Fraud Section and the U.S. Attorney's Office for the Eastern District of Arkansas. The department says the case reflects the government's broader emphasis on combating healthcare fraud, while noting that the claims resolved by the settlement are allegations only and that there has been no determination of liability.

Our earlier coverage of House Financial Services Committee Republicans’ push to update U.S. anti-money laundering (AML/CFT) rules explained their call to cut compliance burdens while improving the usefulness of reporting for law enforcement. We noted proposals to raise outdated reporting thresholds and expand AI-driven risk monitoring, signaling continued congressional scrutiny of how enforcement and compliance resources are targeted at higher-risk activity.

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